Does government spending create jobs or not? Conservatives can't have it both ways

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January 12, 2015 6:45PM (UTC)

Though newly installed Senate Majority Leader Mitch McConnell has vowed to spend the 114th Congress demonstrating that Republicans can govern, the congressional GOP's first major policy move sets the stage for a showdown with the Obama administration. Almost immediately after being sworn in last week, Republicans renewed their push to force approval of the Keystone XL pipeline, which would transport tar sands oil from Canada to the Gulf of Mexico. The administration has signaled that Obama would veto the House-passed bill on Keystone approval, and Senate supporters of the project indicate that they're still a few votes short of a veto-proof majority in their chamber. But McConnell insists that moving forward with Keystone is crucial, touting the project as a job creator.

That brings us to Nobel Prize-winning economist Paul Krugman's New York Times column today, in which he demonstrates how the Republicans' Keystone push shows that they "don't really believe in their own doctrine" on economic policy. After all, Krugman posits, "You can’t consistently claim that pipeline spending creates jobs while government spending doesn’t."

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Though Republicans railed against the administration's stimulus package and the notion of countercyclical fiscal policy in general, their strident opposition to any cuts in military spending -- reliably couched in terms of the impact such cuts would have on defense-related jobs -- and their relentless advocacy for Keystone indicate that they realize government projects can, in fact, create jobs and thereby foster demand. Noting that Barney Frank dubbed Republicans' unyielding opposition to defense cuts "weaponized Keynesianism," Krugman suggests that the GOP's Keystone crusade is evidence of "carbonized Keynesianism."

But is Keystone a worthy project, even if Republicans have exposed their own intellectual dishonesty in championing it? Krugman, who points out that the pipeline would create only a few dozen permanent jobs, answers emphatically in the negative:

And the job gains from the pipeline would, as I said, be only a tiny fraction — less than 5 percent — of the job losses from sequestration, which in turn are only part of the damage done by spending cuts in general. If Mr. McConnell and company really believe that we need more spending to create jobs, why not support a push to upgrade America’s crumbling infrastructure?

So what should be done about Keystone XL? If you believe that it would be environmentally damaging — which I do — then you should be against it, and you should ignore the claims about job creation. The numbers being thrown around are tiny compared with the country’s overall work force. And in any case, the jobs argument for the pipeline is basically a sick joke coming from people who have done all they can to destroy American jobs — and are now employing the very arguments they used to ridicule government job programs to justify a big giveaway to their friends in the fossil fuel industry.